Just like you never want to hear a doctor say "oops" in the operating room, you never want to see a going-concern statement in a financial report about a company you own. Accountants throw these in when they've been over the books, talked to customers, and checked the horoscopes and have concluded there is "substantial doubt" about a company's ability to remain in business. In short, don't blame the accountants if the company files for bankruptcy protection.

You¿d reckon that a going-concern statement would be enough to send investors running to the exits, but it's not. True, many large institutions automatically bail when an existing company gets slapped with one of these, but many individuals (often wrongly) take a chance they know more than the bean counters.

During the tech boom of the late 1990s, many companies actually went public even though they had been hit with going-concern statements. Many of those companies subsequently disappeared. Enough said.

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Wednesday, May 14, 2008

Consumer Prices Up 0.2% in April

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Associated Press

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WASHINGTON--

Inflation pressures eased a bit in April despite the biggest jump in food prices in 18 years.

The Labor Department reported Wednesday that consumer prices edged up 0.2% last month, compared to a 0.3% rise in March.

The lower inflation reflected a flat reading for energy, which helped offset a 0.9% jump in food costs as prices climbed for many basic items, from bread and milk to coffee and fresh fruits.

The unchanged reading for energy reflected a big 4.8% jump in natural gas prices, offset by a 2% decline in gasoline costs.

The reported drop in gasoline prices reflected the government's accounting process, which discounts expected seasonal price changes.

Since gasoline prices normally rise significantly in April, the 5.6% rise in prices for the month turned into a 2% drop after the government adjusted for normal seasonal changes. That was little comfort for motorists now paying record prices at the pump, which are nearing $4 per gallon.

Core inflation, which excludes food and energy, showed prices well behaved in April, rising by just 0.1%, compared to a 0.2% gain in March.

That reading should ease concerns at the Federal Reserve that the sharp increase in food and energy prices this year would lead to broader inflation problems.

The Fed, fighting against a severe credit crunch and spreading economic weakness, has cut interest rates seven times since last September in an effort to keep the country from toppling into a recession.

However, last month it signaled that it might take a pause in the rate cuts, with some Fed officials expressing worries that further reductions in interest rates could trigger unwanted inflation. The central bank is expected to keep rates unchanged when officials next meet June 24-26.

So far this year, overall inflation is rising at an annual rate of 3%, down from a 4.1%increase for all of 2007. Core inflation, excluding energy and food, is up at an annual rate of 1.8% in the first four months of this year, compared with a 2.4% increase for all of 2007.